Question 11 Shareholders probably have the most interest in which one of the following sets of ratio

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Question 11

Shareholders probably have the most
interest in which one of the following sets of ratios?

A.

return on assets and profit margin

B.

long-term debt and times interest
earned

C.

price-earnings and debt-equity

D.

market-to-book and times interest
earned

E.

return on equity and price-earnings

Question 12

Al’s Sport Store has sales of $897,400,
costs of goods sold of $628,300, inventory of $208,400, and accounts receivable
of $74,100. How many days, on average, does it take the firm to sell its
inventory assuming that all sales are on credit?

A.

74.19 days

B.

84.76 days

C.

121.07 days

D.

138.46 days

E.

151.21 days

Question 13
You need to analyze a firm’s
performance in relation to its peers. You can do this either by comparing the
firms’ balance sheets and income statements or by comparing the firms’ ratios.
If you only had time to use one means of comparison which method would you use
and why?

Question 14
The process of determining the
present value of future cash flows in order to know their worth today is called
which one of the following?

A.

compound interest valuation

B.

interest on interest computation

C.

discounted cash flow valuation

D.

present value interest factoring

E.

complex factoring

Question 15
You invested $1,400 in an account
that pays 5 percent simple interest. How much more could you have earned over a
20-year period if the interest had compounded annually?

A.

$749.22

B.

$830.11

C.

$882.19

D.

$901.15

E.

$914.62

Question 16
You just received $225,000 from an
insurance settlement. You have decided to set this money aside and invest it
for your retirement. Currently, your goal is to retire 25 years from today. How
much more will you have in your account on the day you retire if you can earn
an average return of 10.5 percent rather than just 8 percent?

A.

$417,137

B.

$689,509

C.

$1,050,423

D.

$1,189,576

E.

$1,818,342

Question 17
When you retire 40 years from now,
you want to have $1.2 million. You think you can earn an average of 12 percent
on your investments. To meet your goal, you are trying to decide whether to
deposit a lump sum today, or to wait and deposit a lump sum 2 years from today.
How much more will you have to deposit as a lump sum if you wait for 2 years
before making the deposit?

A.

$1,414.14

B.

$2,319.47

C.

$2,891.11

D.

$3,280.78

E.

$3,406.78

Question 18

An ordinary annuity is best defined by
which one of the following?

A.

increasing payments paid for a
definitive period of time

B.

increasing payments paid forever

C.

equal payments paid at regular
intervals over a stated time period

D.

equal payments paid at regular
intervals of time on an ongoing basis

E.

unequal payments that occur at set
intervals for a limited period of time

Question 19

You are considering two lottery payment
options: Option A pays $10,000 today and Option B pays $20,000 at the end of
ten years. Assume you can earn 6 percent on your savings. Which option will you
choose if you base your decision on present values? Which option will you
choose if you base your decision on future values? Explain why your answers are
either the same or different.

Question 20

You have been investing $250 a month for
the last 13 years. Today, your investment account is worth $73,262. What is
your average rate of return on your investments?

A.

8.94 percent

B.

9.23 percent

C.

9.36 percent

D.

9.41 percent

E.

9.78 percent

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